I bet a fiddle of gold against your soul

We all know I love sports analogies, most are baseball centric. My clients get to hear them all the time. You can’t hit the ball if you don’t get into the batter’s box. They all know that one. Another one I was using just yesterday was “Don’t serve up a steaming hot meat pie if you don’t want me to hit it over the fence”. Right now I feel a little bit like Carney Lansford in Angels in the Outfield. Carney played the grizzled nemesis who dug deep into the batters box intent on hitting the ball out of the park.

He was big and strong and very serious about knocking the snot out of the baseball. Well, I’m big and strong and very serious about knocking the snot out of this story. The November 15, 2009 Wine Spectator will feature a story entitled “Growth and Acquisition”. It’s a piece about Bill Foley and his foray into the wine business. It talks about his background and his building of what is quickly becoming a wine empire. Unfortunately, Wine Spectator misses the mark, because while all the PR folks and Wall Street like to focus on the money he makes, they always ignore the corpses and destruction left in his wake. If anyone who reads this blog has any question, when I refer to the Evil Empire, I am talking about Fidelity National Financial. I’m talking about Bill Foley’s flagship. I’m talking about the company he built and then used to change an industry. Not for the better. I have heard more stories of homeowners or borrowers with issues after a transaction with a Fidelity company than any other company. There’s a reason I hate them. And I’ve got the background to support it. The author of the Wine Spectator piece, MaryAnn Worobiec writes:

In 1984 he organized a group of investors and led a leveraged buyout of a small company called Fidelity National Title Insurance, which would turn out to be one of the defining moments of his career.

Mine too, because in 1984 I worked for that little tiny title company. I was sitting in the office in Santa Barbara, California when he walked in with his henchmen. Anyone who follows the history at all knows that not only did he have his office in Santa Barbara, up until he decided he didn’t want to pay taxes or California salaries any more, the entire company was based in Santa Barbara. And if anyone listens to the Gubernatorial debates, Tom McClintock actually mentioned Fidelity National Financial in those debates, saying that FNF was moving their offices to Jacksonville Florida because they were tired of paying California State taxes. They were also tired of California salaries but they couldn’t say that one out loud.

That was only one of Foley’s reprehensible business practices. He is well known in the title industry for paying ridiculous salaries, bringing people in from other companies where they had stable jobs, giving them 60 days to perform and then capping them immediately when they didn’t. There has been much speculation that the purpose of this practice was to steal their book of business. Quite honestly if a title rep or an Escrow Officer moves from one company to another there is attrition in their book of business. Some clients will stay and try out the new team, some don’t like the drama and will give their business to a completely different company and some will come to the new company. There is never 100% capture. For Fidelity it has always been about numbers: market share and making money. It has never been about quality or service. That’s not to say that the rank and file don’t care about quality or service, it just means the executive team doesn’t care about quality or service. The only service they care about is lip service. The rest is all numbers. They have a strict formula and when the orders and closings drop below a certain number heads roll. How many? Thousands. FNF continued to post positive EPS throughout the mortgage crisis. They did it on the backs of their staff. October 2007, FNF lays off 1700 people. July 2008, FNF lays off 1600 workers. February 2009, Fidelity lays off 1500 workers. 18,000 jobs lost since 2003? There’s a number. This is a company that traditionally balances the books on the backs of the employees. When you’re in the service providing business, this is always fraught with peril. When I was laid off at Alliance, I managed to get off an email to the entire company before the IT department had to shut down the mail servers. I simply quoted Howard Schultz, Starbuck’s founder and CEO.

A company that is managed only for the benefit of shareholders treats it’s employees as a line item, a cost to be contained. Executives who cut jobs aggressively are often rewarded with a temporary run-up in their stock price. But in the long run they are not only undermining morale but sacrificing the innovation, the entrepreneurial spirit, and the heartfelt commitment of the very people who could elevated the company to greater heights.

Yet, that’s the Fidelity business model.

What those numbers won’t tell you is that the remaining staff took it up the ass. The minimum reduction in salary is over 20% and those salary cuts remain in place today in spite of the fact that the company has turned around and is posting huge profits again. There are two ways that FNF cuts your salary. One is an across the border slashing. Most employees gratefully accept this because they still have a job. The corporate culture leads them to believe that there is no where else to go for a job. The second way they cut salaries is to lay people off and then bring them back a month or two later as either a temp with no benefits or at a greatly reduced salary. Once again the employees gratefully accept it because it beats the crap out of $1800 a month from the State. I would venture to guess that every single individual currently employed by the Fidelity “family of companies” has taken a huge reduction in pay since 2006. If you haven’t, I’d love to hear from you. And the Easter Bunny. And Santa Claus. Because none of you exist.

Bill Foley’s business practices took an industry that used to take pride in accuracy and reduced that to acceptable risk. In other words, we can afford to do our jobs with X amount of half-assedness. He created a culture where people were so overworked that the probability for them getting their jobs accomplished correctly was in the single digits. As a client of mine used to say “He squeezed people’s eyeballs” in business transactions. And it’s made him a very rich man. It has not made him an honorable man and it has not made him a good man.

So now he’s taking his business “acumen” into the wine business. He’s buying up vulnerable wineries and vineyards and creating another empire. And the wine industry is wetting themselves trying to saddle up to him. Well, you know what? It’s all fun and games until 18,000 people lose their jobs. It’s all bread and roses until he doesn’t want to pay the salaries of a qualified winemaker. It’s his MO, like the scorpion, it’s in his nature. I’ve seen it. Twenty five years of it. This is your future wine industry. You can choose to do business with this man and embrace these business practices or you can choose to opt out. As consumers, we can speak with our wallets. As business people we can choose to not do business with a morally reprehensible character. As employees, we can seek work elsewhere. This man must not be allowed to do to the wine business what he did to the title business.

On October 15, Bill sent out an email to all of the employees of FNF. Here’s a direct quote, because that’s how we roll here at PBE:

Firestone Vineyard has put together a great consumer promotion that I want you to know about. The Winery is sending one lucky consumer to hike the Inca Trail to Machu Picchu in Peru, accompanied by a personal chef and plenty of Firestone wine.

Scroll down to read the latest Newsletter from Firestone. To enter the contest, click here.

Good luck!
Bill

It certainly not the first time Bill has sat out at his ranch in Montana and told his staff “Good luck”. Good luck making your mortgage, good luck keeping your job because I’m going to try my best to steal your book of business. Good luck paying your bills. Good luck getting overtime out of me. I know all of the FNF employees are ready to run down to Machu Picchu right now because not a one of them has had an issue with their 20-30-40% reduction in their pay. Attached to that is the Firestone Vineyards newsletter. Now I can assure you that there are a few FNF employees who are staying drunk through this whole thing, but they aren’t drinking Firestone.

I’m not a big believer in boycotts, but there are a few companies I do boycott. Boycott is different than just not doing business with them. I try to not do business with any of the First American companies. I hate the company but in this business sometimes I don’t have a choice. I try not to allow my transactions to go to a Fidelity company but sometimes you don’t have a choice and they do have some good employees. Those folks need to buy groceries too. I try not to buy goods made in China, but sometimes that’s nearly impossible. I try not to ever watch anything on a Fox station. That includes the news and football games. If there’s a game on another channel, I watch the other game. But I boycott Foley Family Wines. From Ms Worobiec’s article:

From the outside, it doesn’t appear that anything has changed at Kuleto. Founder Pat Kuleto is still the face of the winery, and the winemaker is still David Lattin. But Foley’s management, financial backing and increasing leverage with distributors will keep the brand alive, and likely expand it. “What doesn’t fit in [the portfolio] right now are small niche, cult brands that are too complicated to bring into the portfolio and tough for the sales team to sell,” he says.

If it appears that Foley is focused on the distribution chain, it’s because he is. His original goal-before the buying spree-was to create a multibrand portfolio totaling about 500,000 cases, to get more leverage with distributors. He sees the distribution chain as one of the biggest obstacles in the wine industry. “You need mass. I see that more clearly now [after purchasing Sebastiani] than ever.” He wants to model Foley Family Wines after Jess Jackson’s multibrand Jackson Family Wines. “I really believe that if you get to be a certain size, you get to be more influential with vendors,” he says.

Currently Foley Family Wines owns more than 1,000 acres of vineyards in the United States, 700 of them in Santa Barbara, making Foley the single-largest vineyard owner in the Sta. Rita Hills appellation. With the purchase of Sebastiani, Foley has reached his initial 500,000 case goal, and laughs, saying that he actually “overachieved.” “My interim goal is 750,000 [cases]. I’m trying to be careful,” says Foley. “There are some great opportunities out there. I’m going to run out of money before I run out of wineries to buy.”

Look out. He’s told us what he’s going to do. Don’t let him. Boycott Foley Family Wines. Do it for the future of the industry.

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4 comments for “I bet a fiddle of gold against your soul”

doctor capone

October 20, 2009 at 12:16 pm

Speaking of stench,anybody know what is going on with the Alliance and Mercury companies bankruptcy????

titleslug

October 21, 2009 at 7:24 am

Yesterday, in the mail, I got my copy of the spectrator. I saw the article on Sebastiani and feared what came next. There was the hamburgler with wispy, long, white hair smiling like the cat that ate… an industry. I thought of you, winedog. You didnâ€™t disappoint.
I worked for an old title guy. He respected the processes of title work. He zenned out during back plant searches. He nearly cried when FNF bought Western’s plant. He knew they’d never use it. You market research as easily as you can market open deceit. Foley paid for one of those and ignored the other.
There is too much good wine to drink. His products can rot on the shelves. If a friend or family member brings it, I educate them. Title work became information management. Wine will become formulaic, agricultural value add.
When my friends left the information company I used to work for to work for the hamburgler, I told them I couldn’t go. I worked at ATIC between 91-94. I didn’t know there was a formula then, but I do now. 12 open/closed files per employee. If you aren’t within the ratio, cut staff to meet the ratio or hire someone with a large enough book to even the ratio out. 12:1. While at ATIC I managed a storage warehouse. We stored rented furniture. Thatâ€™s right! As an employee you were less valuable than rented furniture. They paid the furniture bill, they laid your hard working ass off!
Do you think his next winery will be called the 12:1. It should be. Do the multiples work for wine like they do for title? 1 case per employee (booked and shipped)? Perhaps it’ll be 12 pallets? Perhaps 12 barrels? In any case the 12:1 ratio rules the title industry-. Boycotting my ass off- Titleslug